Company Said Many of the Plants Failed Safety Audits

More than 15% of the factories in Wal-Mart Stores Inc.WMT-0.25%'s initial round of safety inspections in Bangladesh failed their audits and had to make improvements to keep doing business with the giant retailer.

Wal-Mart said most of the three dozen factories were able to correct the problems or are in the process of doing so. One seven-story factory, for example, had to knock down an illegally built eighth floor, the retailer said.

The company stopped doing business with two factories that failed the safety audits and couldn't sufficiently fix the problems discovered. One factory had to be closed completely.

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Wal-Mart will release the results of 75 inspections on its website and add others as they are completed, a step no other major Western retailer has taken. The company currently does business with more than 200 factories in Bangladesh, and has pledged to inspect all of them. It previously said it would begin posting results of the inspections by last June.

Wal-Mart is making the moves to get a handle on its supply chain in the wake of deadly disasters at factories that did work for the company and other retailers. The company, based in Bentonville, Ark., is among the largest buyers of apparel made in Bangladesh, and its relentless focus on cost has made it a target for critics of working conditions in the impoverished nation.

"We've spent $4 million on these audits, and we're not done yet," Jay Jorgensen, Wal-Mart's global chief compliance officer, said in an interview. "There's a lot of progress left to be made."

During an October safety audit at Epic Garments Manufacturing Co., a factory near Dhaka, engineers hired by Wal-Mart checked on new red fire doors and outside staircases that had been installed to make evacuation easier in case of a fire and to prevent flames from spreading from stock rooms to factory floors.

"Fireproof doors and materials weren't even available in Bangladesh," Epic Group Chief Executive Ranjan Mahtani said in an October interview at his plant "We had to fly them in from abroad and teach local manufacturers how to make them." He said he had already spent $300,000 on safety improvements to meet standards set by Wal-Mart and other Western retailers.

The published audits won't offer specific findings about conditions at the factories, such as whether there are too few exits or if a building's columns are capable of bearing the weight of the structure. Rather, they will give a general risk assessment based on a letter grade that ranges from A through D.

Wal-Mart said it would stop production at factories that receive a D rating, though the factories have a chance to correct the problems and go through another assessment.

Critics say the disclosures don't provide enough information to workers and others who want to keep tabs on factory improvements.

"I am struck by how little real information they are providing," said Scott Nova, executive director of the Worker Rights Consortium, a Washington labor-monitoring group. "They offer no specifics whatsoever as to the dangers workers face in these factories, all we get is a scoring system that is largely opaque."

Wal-Mart said the letter-grade system aims to help give people an easily understandable overview of the safety situation in a given factory.

Jan Saumweber, Wal-Mart's head of ethical sourcing, said she plans to increase her staff by 40% this year and add a team of 10 engineers to the company's Bangladesh sourcing office to regularly inspect factories. Ms. Saumweber took over the ethical sourcing job in September when Rajan Kamalanathan stepped down after a decade-long tenure at Wal-Mart.

Wal-Mart said it will also start to incorporate safety standards into merchants' incentive-based compensation and train buyers to take safety into account when placing orders with factories.

"These are big changes, and the company takes this very seriously," Ms. Saumweber said.

Wal-Mart has said it would put up $50 million in low-interest loans to help factories make building improvements. No factories have tapped the financing offer so far, the company said.

Corrections & Amplifications More than 15% of factories in Wal-Mart Stores Inc.'s initial round of safety inspections in Bangladesh failed their audits and had to make improvements to keep doing business with the giant retailer. An earlier version of this article said nearly half the factories had failed.

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